U.S. Secretary of State Hillary Clinton urged Israel on Thursday to extend its freeze of construction in West Bank settlements, telling Channel 10 in an interview that such a move would be "extremely useful" in advancing peace negotiations with the Palestinians.

Clinton, who was visiting the region this week for a second round of direct talks between Palestinian President Mahmoud Abbas and Prime Minister Benjamain Netanyahu, suggested extending the partial freeze for even a limited amount of time.

"Where we sit now it would be useful for some extension, it would be extremely useful," Clinton said in the interview. "I don't think a limited extension would undermine the process going forward if there were a decision agreed to by both parties."

Clinton added that the U.S. believed it necessary to create a good "atmosphere" for the renewed talks, and that like Netanyahu, she regretted that negotiations had not begun sooner.

The issue of settlements would have to be brought to the table if the sides wished to see these negotiations advance and reach their goal of a democratic Israel alongside a Palestinian state, she said.

The secretary of state has participated this week in three joint meetings between Abbas and Netanyahu - two in the Egyptian resort town of Sharm El-Sheikh and another in Jerusalem - and has held a handful of private talks with each leader.

She and U.S. envoy George Mitchell have expressed optimism regarding the progress of the talks and said that both Netanyahu and Abbas seemed serious about reaching a peace agreement this week.

Abbas, who met Clinton earlier Thursday at the Palestinian Authority headquarters in Ramallah, told reporters prior to that meeting that he saw no alternative to continuing the talks in search of a peace deal with Israel.

"We all know there is no alternative to peace through negotiations, so we have no alternative other than to continue these efforts," Abbas said.

It was not clear whether Abbas was suggesting that the Palestinians would remain committed to the talks even if Israel does not extend moratorium on construction in West Bank settlements, set to expire in 10 days. He had previously said the talks could not survive without continued restrictions on the construction in areas the Palestinians want for a future state.

Despite Abbas' remarks, Palestinian Foreign Minister Riyad al-Maliki said Thursday that negotiators would quit direct peace talks if Israel builds any new settlements after the end of a partial moratorium on construction in the West Bank.

"If one settlement is built after the end of the freeze, we will stop direct talks with Israel," al Maliki told reporters on the sidelines of an Arab League meeting in Cairo.

The Arab League also backs the Palestinians' refusal to continue direct peace talks if Israel resumes building settlements, the organization's chief said at the meeting in Cairo on Thursday.

"If settlement construction does not stop, then there is no use for continuing negotiations," Amr Moussa told a press conference, saying this was the opinion of the Arabs and Abbas. "Negotiating with occupation is simply a waste of time."

Clinton held talks in Jordan with King Abdullah after her meeting with Abbas on Thursday, wrapping up the round of negotiations that began in Egypt on Tuesday.

"Today, His Majesty and I discussed ongoing negotiations and I expressed my confidence that Prime Minister Netanyahu and President Abbas can make the difficult decisions necessary to resolve all of the core issues within one year," she told a news conference in Amman.

Those issues include the borders of a Palestinians state and the future of settlements, Jerusalem and Palestinian refugees.

In a separate interview with ABC News in Jerusalem, Clinton said that hard work was under way "to make sure there remains a conducive atmosphere to constructive talks."

Israeli and Palestinian negotiators were due to meet next week and set a new date for leaders to convene.

In a statement, Netanyahu's bureau said he was standing by his position not to extend the moratorium. He has said, however, he intends to limit the scope of future settlement construction.

The settlements are deemed by the World Court to be illegal, a finding disputed by Israel. Palestinians fear the enclaves will deny them a viable and contiguous country.

Meeting in Brussels on Thursday, European leaders issued a statement also calling on Israel to extend the moratorium.

As part of Obama's drive for a wider peace between Israel and the Arab world, U.S mideast envoy Mitchell visited Damascus on Thursday and plans to visit Lebanon to meet leaders there.

Meanwhile, Egyptian President Hosni Mubarak told Israel's Channel 1 TV that he had raised the idea with Netanyahu to keep the moratorium in place for another three months, hoping to buy time for negotiators to agree on the borders of a Palestinian state.

But officials close to the talks said Netanyahu had rejected that proposal.

Officials close to the talks also said the United States, which launched the face-to-face negotiations in Washington on Sept. 2 after a 20-month hiatus, had made a similar proposal. U.S. officials declined to comment.

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